Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Ask Price

What it is:

The ask price is the lowest price a prospective seller is willing to accept in exchange for a specific security. 

How it works (Example):

While the ask price is the lowest price a prospective seller is willing to accept, the bid price is the highest price that a prospective buyer is willing to pay for the security. The highest bid and lowest ask are quoted on most major exchanges, and the difference between the two prices is called the bid-ask spread.

When an investor decides he wants to sell a security he owns, he doesn't have to offer it at market price; instead he can use a "limit order" to specify to his broker that he wants to sell the security, as long as it's above a certain price.

For example, Sue owns shares of Company XYZ, but is now interested in selling them. Lately, shares of XYZ have been trading between $20 and $25 throughout the day, but Sue would prefer not to sell for any price under $24. Because she's indicated a "sell price," Sue's broker will only execute the trade at (or above) that price.

Why it Matters:

Usually, the ask price for a specific security displayed in most "quote" services (like Yahoo Finance) is the lowest ask price in the market. But investors don't have to buy or sell securities at these prices. Investors can specify their bid price when telling their broker to execute a trade. The trade may not be executed immediately (or even ever, depending on buyers' bid prices), but the seller can rest assured that he didn't make less than he intended.